OECD Economic Surveys_ Hungary - OECD

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Table of contents Basic statistics of Hungary, 2010 Executive summary Assessment and recommendations Hungary’s economy is facing renewed market stress Figure 1. Key indicators Table 1. Short-term outlook Stabilising the economy and boosting potential growth Short-term policies to restore confidence and head off the risk of a prolonged downturn Resuming fiscal consolidation Figure 2. Net lending and fiscal consolidation Figure 3. Average tax wedge for different income percentiles Figure 4. General government deficit and elections Facilitating household deleveraging without hurting banks is the key to putting growth on a sound footing Figure 5. Corporate and household lending Appropriate measures to support the labour market and prevent an increase in structural joblessness Figure 6. Beveridge curve, long-term unemployment and NAIRU Box 1. Core recommendations on short-term policy priorities Medium-term structural policies to foster potential output growth Making debt sustainability less sensitive to macroeconomic shocks Ensuring stable and affordable financing of the economy while minimising financial risks Living standards can be boosted by lifting one of the lowest participation rates in the OECD Figure 7. Labour force participation rates in OECD countries Figure 8. Employment rates of women and total fertility rates Improving health outcomes and the system Figure 9. Life expectancy at birth relative to national income and health expenditure Box 2. Core recommendations on medium-term policy priorities Bibliography Annex A1. Progress in main structural reforms Chapter 1. Ensuring debt sustainability amid strong economic uncertainty A relatively favourable fiscal position despite the economic crisis The cyclically-adjusted deficit improved markedly since the onset of the crisis… Figure 1.1. General government financial balances Box 1.1. A DSGE simulation of the macroeconomic impact of fiscal consolidation in Hungary … although the underlying fiscal position has significantly deteriorated recently Figure 1.2. Cyclically adjusted and underlying fiscal balance Box 1.2. Dissolution of the second pillar of the pension system Figure 1.3. Composition of fiscal consolidation The Széll Kálmán plan: a positive step towards a more sustainable fiscal consolidation Table 1.1. The Széll Kálmán plan Long-term fiscal sustainability remains highly sensitive to economic shocks The downward debt trajectory is highly sensitive to economic shocks Figure 1.4. Characteristics of government debt Figure 1.5. Stochastic general government debt simulations Long-term fiscal sustainability gaps may have worsened recently Table 1.2. Sustainability indicators Table 1.3. Projected change in gross age-related expenditure/GDP ratio and contributing factors Achieving more progress towards fiscal sustainability Reducing the impact of economic shocks on public debt Table 1.4. Hungary: debt management responses to the crisis Figure 1.6. Evolution of debt risk indicators Improving the future consolidation mix Figure 1.7. Government employment Tackling long-term pressures on public spending of population ageing Adequate fiscal rules could help maintain the fiscal adjustment effort Box 1.3. Recommendations on ensuring debt sustainability amid strong economic uncertainty Bibliography Annex 1.A1. A stochastic approach to Hungarian debt sustainability Table 1.A1.1. Standard deviation of shocks Table 1.A1.2. Correlation of shocks Chapter 2. Ensuring financial stability and efficiency The banking sector remains fragile with a risk of credit rationing The banking sector remains vulnerable… Figure 2.1. Capital adequacy ratio Figure 2.2. Leverage ratio Figure 2.3. Loan-to-deposit ratio Figure 2.4. The structure of banks’ liabilities Figure 2.5. Overdue and renegotiated loans Table 2.1. Claims in arrears … which could lead to credit rationing Figure 2.6. Credit conditions and credit standards remain tight Figure 2.7. Corporate and household lending Restoring financial intermediation requires a careful mix of measures Tighter regulation should take into account risks of procyclicality Box 2.1. Major measures taken to reduce household indebtedness and to clean-up banks’ portfolios in 2011 Debt restructuring programmes should not impose an excessive burden on banks and be well-targeted The design of a financial levy should not hurt bank solvency Figure 2.8. The average ratio of taxes to total bank assets Table 2.2. Comparison between bank levies Figure 2.9. Profitability of Hungarian banks in comparison to profitability of other banks in the region and parent banks in home countries Sustainable financing of the economy requires lowering intermediation costs High intermediation costs point to a lack of competition Figure 2.10. Net interest margins in Hungary in comparison to its peers and decomposition for Hungarian banks Box 2.2. Measuring market competition Figure 2.11. Competition measures Competition could be enhanced by encouraging consumer mobility Efficient regulation of pension funds should spur long-term savings Table 2.3. Relative performance of pension funds Figure 2.12. Portfolio composition of pension funds Box 2.3. Charge ratio Table 2.4. Charge ratios and equivalent asset-based fees Figure 2.13. Charge ratios of Hungarian pension funds Financial regulation and supervision has to take into account systemic risks Macro-prudential regulation should be adapted to local credit cycles Asymmetry between host and home regulation should be addressed Box 2.4. Policy recommendations to ensure financial stability and efficiency Bibliography Annex 2.A1. Determinants of net interest margins in Hungary and its OECD peer group in Central and Eastern Europe Chapter 3. Towards a more inclusive labour market The crisis and its aftermath have taken a heavy toll on the labour market A limited impact of growth on job creation so far Figure 3.1. Unemployment rates have increased since the crisis Figure 3.2. The effects of the recession across groups of workers Figure 3.3. Change in labour force participation rates Ensuring labour market recovery Figure 3.4. Regional migration and unemployment Figure 3.5. Employment protection legislation Raising participation rates Various groups of workers are poorly attached to the labour market Figure 3.6. The source of differences in labour utilisation in selected OECD countries Figure 3.7. Labour force participation rates by age group and gender Figure 3.8. Labour force participation rates by age group and level of education Improving the integration of under-represented groups in the labour market Fostering the development of part-time employment Figure 3.9. Part-time employment Reforming family policies to enhance women’s labour market participation Figure 3.10. Maternal employment rates relative to social expenditure, parental leave and childcare Improving labour market integration of disabled working-age population Figure 3.11. Disability benefit recipients and employment rates of disabled workers Remedying youth non-employment by reforming the education system Figure 3.12. Combining study and work is an effective pathway to enter the labour market Promoting the participation of the elderly Figure 3.13. Employment rates of older workers and retirement age Figure 3.14. Lifelong learning and employment rates Tackling the problem of labour market exclusion of the Roma Box 3.1. Recommendations to foster labour market inclusiveness Notes Bibliography Chapter 4. Improving health outcomes and system Health outcomes are generally poor The overall health status of the Hungarian population is weak Figure 4.1. Life expectancy indicators Table 4.1. Mortality rates for infants and by leading causes Inequality in health outcomes is high Poor health outcomes are driven by factors beyond the health care provided Figure 4.2. Health risks The health system has been ineffective at improving the health status Figure 4.3. Mortality amenable to health care and health expenditure A high utilisation of health care services with limited resources Figure 4.4. Health care consultations and hospital resource use Figure 4.5. Health care resources Table 4.2. Health care expenditure for selected types of care Figure 4.6. Pharmaceutical expenditure The delivery of health care services faces funding and staffing constraints Reforms of the health care system Enhancing spending efficiency, keeping output inflation and costs under control Improving health outcomes and macroeconomic performance Figure 4.7. Relative survival rates for cancer Table 4.3. Average monthly earnings of employees by sector of activity Figure 4.8. Age distribution of physicians Box 4.1. Policy recommendations to improve health outcomes and system Notes Bibliography Annex 4.A1. Health care system organisation Figure 4.A1.1. Flow of funds in the health care system Glossary